‘Tax Cuts for the Rich’?

By Thomas Sowell
Editors Note: While Thomas Sowell has retired from weekly editorials Mr Sowell has and occasional opinion on the passing scene, this is one.

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‘Tax Cuts for the Rich'?
Thomas Sowell
Thomas Sowell

USA –  -(Ammoland.com)- One of the painful realities of our times is how long a political lie can survive, even after having been disproved years ago, or even generations ago.

A classic example is the phrase “tax cuts for the rich,” which is loudly proclaimed by opponents, whenever there is a proposal to reduce tax rates. The current proposal to reduce federal tax rates has revived this phrase, which was disproved by facts, as far back as the 1920s — and by now should be called “tax lies for the gullible.”

How is the claim of “tax cuts for the rich” false? Let me count the ways. More important, you can easily check out the facts for yourself with a simple visit to your local public library or, for those more computer-minded, on the Internet.

One of the key arguments of those who oppose what they call “tax cuts for the rich” is that the Reagan administration tax cuts led to huge federal government deficits, contrary to “supply side economics” which said that lower tax rates would lead to higher tax revenues.

This reduces the whole issue to a question about facts — and the hard facts are available in many places, including a local public library or on the Internet.

The hardest of these hard facts is that the revenues collected from federal income taxes during every year of the Reagan administration were higher than the revenues collected from federal income taxes during any year of any previous administration.

How can that be? Because tax RATES and tax REVENUES are two different things. Tax rates and tax revenues can move in either the same direction or in opposite directions, depending on how the economy responds.

But why should you take my word for it that federal income tax revenues were higher than before during the Reagan administration? Check it out.

Official statistics are available in many places. The easiest way to find those statistics is to go look at a copy of the annual “Economic Report of the President.” It doesn't have to be the latest Report under President Trump. It can be a Report from any administration, from the Obama administration all the way back to the administration of the elder George Bush.

Each annual “Economic Report of the President” has the history of federal revenues and expenditures, going back for decades. And that is just one of the places where you can get this data.

The truth is readily available, if you want it. But, if you are satisfied with political rhetoric, so be it.

Before we turn to the question of “the rich,” let's first understand the implications of higher income tax revenues after income tax rates were cut during the Reagan administration.

That should have put an end to the talk about how lower tax rates reduce government revenues and therefore tax cuts need to be “paid for” or else there will be rising deficits. There were in fact rising deficits in the 1980s, but that was due to spending that outran even the rising tax revenues.

Congress does the spending, and there is no amount of money that Congress cannot outspend.

As for “the rich,” higher-income taxpayers paid more — repeat, MORE tax revenues into the federal treasury under the lower tax rates than they had under the previous higher tax rates.

That happened not only during the Reagan administration, but also during the Coolidge administration and the Kennedy administration before Reagan, and under the G.W. Bush administration after Reagan. All these administrations cut tax rates and received higher tax revenues than before.

More than that, “the rich” not only paid higher total tax revenues after the so-called “tax cuts for the rich,” they also paid a higher percentage of all tax revenues afterwards. Data on this can be found in a number of places, including documented sources listed in my monograph titled “‘Trickle Down' Theory and ‘Tax Cuts for the Rich.'

As a source more congenial to some, a front-page story in the New York Times on July 9, 2006 — during the Bush 43 administration — reported, “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.” Expectations, of course, are in the eye of the beholder.

About Thomas Sowell
Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, as well as a prolific author including Black Rednecks And White Liberals. His website is www.tsowell.com. To find out more about Thomas Sowell and read his articles visit his website above.

  • 8 thoughts on “‘Tax Cuts for the Rich’?

    1. The Right likes to cut taxes, and yes mainly to The Rich which really does not trickle down as much as they want you to think it does. Plus they love to spend out money, and a lot of it on themselves. Now The Left likes to raise taxes, spend a lot of our money, and also a lot of it on themselves So Who is correct? I say neither as our system is suppose to be a multi party system that can work together to reach a compromise. What ever happened to the Government our Founders Gave US? . Me I am a life long registered Independent. I have voted for 46 years. I have never voted a straight party ticket in my life. I have voted for a couple of Independent, and a bunch of R & D as I vote for The Person and Not The Party. Enough said, other then Free Your Mind and Come Join me. Dave

      1. d, did you read my prior post? It’s impossible for any reduction in income taxes to not benefit the “rich” because they are the ones with the money and paying the income tax. To be technical, by law, there should not even be a federal income tax, but I won’t get into that discussion, and if there wasn’t, I wouldn’t have the job I do.

        Compromise between politicians has created the byzantine system we have now – they all want to help themselves or their friends and families. My ideas on government are more inline with the Republicans, in that I believe we need to reduce the amount of our money government receives. The less they have, the less they can misappropriate.

        1. @Heed, I believe that the Congress and president, and the states all agreed to the 13th amendment to allow for tax on income.

    2. Have you ever seen a congressman/woman complain about their taxes going up when they start talking about raising taxes? Me neither. I wonder why that is?

    3. Yes, the sham of “tax breaks for the rich”. The “poor” do not pay taxes, and if they do, pay very little. A “poor” person could have a 100% decrease in income tax and it would be of little to no benefit to the economy, nor even to them. A one-percent decrease in income tax on a top-earner could be tens of thousands of dollars or more. Those savings mostly go directly back into investment, which will increase business activity and productivity, helping our economy expand, which leads to increased earnings and increased tax revenue on both the corporation and the individual.

      The biggest issue with any tax policy is that after many years, the social, political, and other exemptions, and exceptions, etc., that politicians put into it, result in a corrupt system, which is what I believe the people that cite the “tax breaks for the rich” are really complaining about. Even a flat tax system, which is a good idea, will eventually bloat and fail due to politicians changing the code to suit their agendas, which as the years go by, there are more and more changes based on all the various politicians getting their hands into it.

      Some tax breaks that appear to only favor the wealthy, help the middle-class, too, such as the capital gains rates and the exemption on the sale of a primary residence. The poor will typically not benefit from that, or by much, if they do. Reason being that one must first have taxable income.

      I remember when I was at the IRS, a coworker complained that Perot paid *only* $30 million in income tax. A lot of his income was in nontaxable federal bonds, and he lived in Texas (no state income tax). I won’t even *earn* $30 million dollars in my lifetime, and I am doing well. Ironically that coworker used to brag about her husband’s 6-figure salary that he got as a mid-level manager at the utility company, which was substantially more than we earned. That made her upper-middle-class, and in our eyes one of the “rich”, which she used to constantly rail against.

      1. @Heed, Regarding your correct observations about the poor not paying any federal income tax, don’t forget the Earned Income Credit, a direct redistribution of cash from those who pay FIT to those who file, but do not pay FIT.

        1. WB, I didn’t forget it, I intentionally didn’t mention it, since as you stated it is money being paid to the poor because they are poor and isn’t a tax, except on us.

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